Cenovus Energy refines its methods for retaining mid-career employees
Cenovus Energy has the same issue as most companies: the baby boomers are aging and there’s an impending labour shortage. But the energy industry has the added challenge of workers becoming contractors. “Once they hit around age 55, 56, they do it primarily for the reason that it provides them a lot of flexibility,” says Catherine Widdoes, director, talent acquisition and total rewards, with the Calgary-based oil company.
Cenovus was formed on Dec. 1, 2009, when Encana Corp. split into two distinct companies: Cenovus, an integrated oil company, and Encana, a natural gas company. At the time, Cenovus (and Encana) had a typical DC plan—which, according to Widdoes, is common in the energy industry. “We had an old legacy DB plan that had been closed for many years, and we had about 50 people in it—a very small number.”
In those early years, Cenovus’s long-range business plan focused on growth. That meant looking at the skills and talent it would need in the future. With their skills and years of experience, older workers are a valuable resource, so the company asked what it could do to keep them working at Cenovus. “We have a lot of leaders in the next generation below the baby boomers, and they are being promoted earlier and need support,” explains Widdoes. “If we can keep our mature workforce around longer, then that just solves that problem for us in a lot of ways.”
So how do you keep a group of fiftysomethings from heading to the energy company next door? Simple. The “golden standard of retention”: the DB pension plan, which research continues to support. According to a recent Towers Watson retirement attitudes survey, 71% of those with DB plans said the retirement program is an important reason for them to stay with the company.
Making Plans
Cenovus set about designing a plan that would meet its labour needs without forcing employees to give up their flexibility. “There are still a lot of young people who come out of school who don’t want to commit themselves at age 24 to being in the same company until age 60,” says Widdoes.
So Cenovus created a mid-career DB plan. The premise of the plan is that, after 10 or 15 years, employees will have been at Cenovus long enough to decide that they want to stay with the company for the rest of their career. “We wanted to provide the best of both worlds,” says Widdoes. “When [employees are] in the early years of their career, they’ve got the DC plan, they’ve got the portability, the cash. Then when they’re starting to worry about retirement, they can make the decision [to go into the DB plan]. It’s completely optional.”
Eligibility for choosing the DB plan is based on a points system. When an employee reaches 50 points—a combination of age and the employee’s years at Cenovus (e.g., an employee who is age 37 with 13 years at Cenovus would be at 50 points)—the employee can select whether to go into the DB plan or remain in the DC.
“And it’s not a one-shot deal,” says Widdoes, noting that employees can sign up for the DB plan every year during the company’s flex benefits plan renewal. “If employees don’t want to decide at age 37 or 38—[if] they still think it’s too early to make that commitment—they can make it any year after that. A lot of our younger folks might not make that commitment until they’re in their early 40s, and that’s all fine. We just hope they make it at some point.”
Cenovus’s DB plan has two unusual elements. First, the plan’s normal retirement date has been moved out to age 70 from 65, with early retirement eligibility at age 60. “We want [employees] to reach age 60, so our early retirement kicks in at 60,” Widdoes explains. “If they want to stay until age 70, they can.” S
econd, while the final income depends on an employee’s final average earnings, the formula isn’t based on the best three of the employee’s last five years like many DB plans. “Ours is the best five of the last 10 years,” Widdoes explains. “That’s a really attractive feature, because a lot of folks would like to look at those years [age] 55 and on to get a little bit more work/life balance.”
Getting the Word Out
Widdoes explains that HR did a lot more communication on the DB plan than it would normally do on a regular benefits program. And although communication was targeted at those employees eligible to select the DB plan, it was provided to the entire employee body. Part of the reason for this was the focus group results. “When we interviewed some of the younger folks in their 20s or 30s, some of them didn’t know what a DB plan was,” says Widdoes. “Or they would say to me, ‘Oh, my grandpa has that.’” There was a real need, she says, to explain how the plan works and what survivor benefits are.
“There haven’t been a lot of new DB plans; it hasn’t been something people have been hearing a lot about. So [for us], it was reintroducing something into the population.”
In 2011, Cenovus held a pension session and had it professionally filmed. “We brought a film company in, and our field locations were hooked up by web,” says Widdoes. The plan’s actuaries participated to explain the more complex aspects, and there was a Q&A session. “We filmed the whole thing and then made it available to those folks who hadn’t attended a session or [who] had attended but wanted to revisit it on our internal website.”
Cenovus created a new piece of software that employees could use to project the two different pension alternatives (DB and DC) using different assumptions, and then decide for themselves. The company also provided employees with an opportunity to meet with a financial advisory company. By the time the DB plan had its first enrollment on July 1, 2012, employees had more than enough information, as well as the opportunity to talk to independent financial advisors and actuaries.
Later this year, Cenovus will be presenting sessions for its entire employee population about the DB plan and providing even more information. “It’s something we think we need, to make sure that employees who haven’t qualified yet still understand that it’s there for them,” adds Widdoes. “Because it is quite a big benefit for them when they reach the 10 years.”
While the DB plan may be more expensive for Cenovus to maintain, Widdoes says that from a workforce planning perspective, “the pension is a very economical way to retain your staff. “Those folks have decades of experience. You don’t want to see it walking out the door into somebody else’s company.”
Brooke Smith is managing editor of Benefits Canada.
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